Crisis of faith

[Valhalla_tech]

I had my very first run-in with a potential client the other day. I acquired this client from thumbtack. This client wanted me to check a possible failed PSU to see what kind it was so she could buy a replacement and have me install it. She also ordered a roller from Amazon and what that installed in an HP inkjet. So, I quoted her a $25 service fee for me to come out to the property, which would go towards the final bill of $90 for labor.

Once I talked to her on the phone she started telling me about a bunch of other crap that she would like to do. She wanted me to check this and that, blah, blah, blah. Well, I come to find out that it's a business that was the destination. So, after the phone call, I wrestled with myself to either honor the quote, which is based on my residential pricing or re-quote her my business pricing.

I decided to quote her my business pricing because of the future projects she mentioned and this is the email I sent her:

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Hello [prospect]:

Here is the pricing structure for businesses. It's pretty simple. There are three options:

Pay-as-you-go: $99/hr (minimum 1 hour)
Block hours: $85/hr (minimum 5 hours)
Monthly: $75/hr (minimum 5 hours)

Pay-as-you-go, is just that. You call me anytime and I come out for x amount of hours and bill accordingly.

Block hours is where you pre-pay for a block of hours (minimum of 5 hours). Those hours are then usable whenever you want. They never expire. You can call me a year from now and use whatever hours you have left. Payment is due upfront.

Finally, monthly is where you pre-pay for a set amount of hours every month (minimum of 5 hours). For example, you can purchase 10 hours and you'll have 10 hours available to you every month. Unused hours do not roll over. So, if you only use 8 hours for the month, the next month you will have 10 hours, not 12. Payment would be due the first of every month. No contract. You can cancel whenever you want.

Based on what you tell me, [prospect], I'm thinking the best option for you would be the block hours. You say you're going to need a local tech guy, so having those hours at the reduced rate will save you money. It will also save time, because we won't have to go through the billing process every time, as the hours are already paid for. Also, the networking project you're going to want to do, eventually, could take anywhere around 3-5+ hours, depending on what obstacles I run into. The amount of hours you purchase is up to you, as long as it's at least 5. Whatever you think you'll need for a given period.

You can also do monthly, however, I only suggest that for larger businesses that have an IT department that would need constant attention. I don't think that will be the case for you.

Tomorrow, it shouldn't take me more than an hour to identify everything that you've asked me to identify.

Let me know what you decide. I look forward to working with you!
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She declined, citing the reason being that she wanted to find someone more reasonable, which I took to mean cheaper, of course. I explained to her that those techs that charge a low flat rate will end up costing her more money in the long run. Plus, the reason there is a different pricing structure for businesses is because there are more variables and obstacles in a business environment that I could potentially run into.

My questions are, did I handle that situation properly? Should I have honored the original quote and chalked it up to a mistake and eat the cost of time spent? Are the prices I quoted reasonable for both residential and business? I'm aware the local market dictates pricing. I ripped the business pricing structure straight from a guy doing the same type of work that I use to work with, in this area, North Carolina. I figure if it ain't broke, don't fix it. Let me know and thanks for any replies in advance.

 

[nlinecomputers]

My questions are, did I handle that situation properly? Should I have honored the original quote and chalked it up to a mistake and eat the cost of time spent?

Yes. She thinks you are a crook. You agree to one price and then find out she is a business with deeper pockets and raise the rates. And you don't really offer any benefit of this so called business rate. In most states you just committed a crime.

 

[gadgetfixup]

Thumbtack customers spent $90 an hour? In our area if you quote $25 an hour on a thumbtack lead you'll probably lose the sale. Thumbtack must work better in larger Cities.

 

[glennd]

Put it down to a valuable learning experience.

 

[sapphirescales]

Of course she was gonna run after you jacked the price up to high heaven. If you're not willing to work for what you charge for residential rates, then raise the prices. Either that or always quote business rates and residential rates in the emails you send. But honestly, most clients don't understand why business rates are higher. You'd be better off choosing a smart pricing structure that allows you to keep ONE rate, but that increases the final bill as more time is spent. If you end up spending too much time with a residential client and the bill gets to be ridiculous, offer to only charge them X amount because you're trying to be reasonable.

The best pricing structure is flat rate. Charge a flat rate for everything, but put a maximum time limit on it. For example, set up a home/small business network, $229 (max of 2 hours; $79/hour thereafter). Clients will appreciate that they know pretty much exactly what it's going to cost.

The block hour BS we've found to be a total flop. Charge what you want to charge. It sounds shifty and dishonest to most people. Businesses don't like to tie up capital for no reason. It's like buying a gift card. If it's something you're not going to use frequently, you won't do it. The only people that are going to do it are those that KNOW they're going to use it, so in the end you lose more money and alienate a lot of potential clients by acting shady.

 

[Valhalla_tech]

Hmm, the general consensus seems to be that having two different pricing structures is not the way to go. I wasn't trying to be shady at all. I just know that a business setting will tend to have more variables than a residential setting. I guess I should go back to the drawing board and make one pricing structure.

 

[Valhalla_tech]

Another question I forgot to pose is how do I combat customers wanting to purchase the parts themselves? The bottom line is what I'm looking at here. I purchase the part equals a markup, which equals profit. Even more so if I'm partnered with the manufacturer, which is something I've been looking into.

 

[glennd]

Another question I forgot to pose is how do I combat customers wanting to purchase the parts themselves? The bottom line is what I'm looking at here. I purchase the part equals a markup, which equals profit. Even more so if I'm partnered with the manufacturer, which is something I've been looking into.

There was a discussion about that here recently. I think the general consensus is you should discourage that practice but if the customer insists then you don't have to turn down the job but rather charge full labour per hour with absolutely no warranty on the parts or even if the parts are the right ones and no guarantee that the customer's problem will be fixed or if it is that it won't be broken again tomorrow. In other words the liability lies entirely with the customer. Because, well you haven't done a diagnosis. I get that kind of thing on a regular basis and I always encourage the customer to let me see the machine before they spend any money buying parts.

At least half the time the problem is not what they think it is. If I supply the parts I'll back it up, make sure the part is correct for the machine (so easy to mess up), replace if faulty and generally make it as smooth as possible for the customer. If customer supplies the parts then they get to deal with replacements if faulty and the consequences of getting the wrong part.

Do the job but there's no come back if it goes pear shaped.

Edit:
https://www.technibble.com/forums/threads/i-can-get-it-cheaper-online.66189/#post-516227

Also, don't be looking at the bottom line, be focusing on the "added value". Let the customer understand they might save a few bucks but in the end they'll be doing themselves a huge disservice = "false economy".

 

[sapphirescales]

It's not often that we get clients that want to buy the parts themselves. But when it does happen, we make sure to tell them that we don't warranty the part, any part of the computer, or our work. We guarantee that it was installed correctly and that's it. I make sure and tell them that they don't know what the best parts are, but we do. And if they decide to get a part and have us install it, we won't offer our expertise or tell them whether they bought a good part or a bad part. We just install it. LOL. I love seeing the look on people's faces when they buy a Diablotek 400 watt power supply and have us install it and it dies a few weeks later, sometimes taking the rest of the computer along with it. Some people have to learn it the hard way......

 

[calldrdave]

I don't think you did anything wrong. Here are the key elements.

1. You quotes via Thumbtack based on the information you have. Thumbtack requests are hilarious. They tell you nothing but expect you to quote a job.
2. You quoted $25 eval applicable to $90 an hour
3. She gave you additional requests outside of quote in 1. Your quote isn't valid because it isn't for the work requested in step 1.

A new negotiation begins. She is requesting work and you give her a quote. Your quote sounds like it was $9.00 more than the original quote. I hardly think that was a dramatic increase in price. I don't agree with a residential/business pricing differential absent any other designation. You can say you charge extra for server work, after-hours support, or for invoiced work (common with businesses). I'd go so far as asking Thumbtack for a refund on the quote because her service request was invalidated by her - I don't want you to do x, I want you to do y.

Her objection wasn't "you aren't honoring your quote". The objection was your charged are unreasonable. A client that uses Thumbtack wants to get the lowest price. Don't be surprised with price objections from these type of customers. I accepted a few Thumbtack jobs, but only when I think it's a quality customer. The request is detailed and I can tell they are using Thumbtack because they can't find anyone to fix it rather than looking for the lowest price.

 

[Markverhyden]

She changed the scope on you. And that is how you should have framed it. But I agree where she could think that you were not being consistent in your pricing. Being consistent is very important. And if you are going to have prices for residential and business you must make that clear up front. Personally I only have one pricing structure.

 

[nlinecomputers]

I have higher prices for business related tasks not for general labor. I charge more for work on a server or business grade firewall. I charge more for elevated response time. If you want me drop everything and go onsite RFN then it will cost you. Want me there after hours, weekends, or holidays? It will cost you. That is what I consider business related rates. Honestly, your letter said, "Oh I just discovered you are a business client. so I 'm charging your more because I can." What benefit are you providing to justify the rate?

 

[Bryce W]

Nothing wrong with charging more for businesses, but as others said, you didn't sell any of the benefits. Greater response time, business grade stuff etc.. It DID sound like "oh, you are a business, let me charge more". Just something to make sure you do next time.

I think the lesson here is to ask "is this for a home or a business?" in the future and THEN quote your pricing.

 

[calldrdave]

For those that charge differentials between home/residential and business, how do you define that?

So many people run small businesses out of the home, I don't think I could even make the distinction if I wanted to. Computers are personal devices used for all sorts of purposes: personal and professional.

I can understand if there is a stand-alone server, although I know residential clients that run servers in their home. What questions should you ask to determine if you should charge the business rate?

 

[allanc]

For those that charge differentials between home/residential and business, how do you define that?

So many people run small businesses out of the home, I don't think I could even make the distinction if I wanted to. Computers are personal devices used for all sorts of purposes: personal and professional.

I can understand if there is a stand-alone server, although I know residential clients that run servers in their home. What questions should you ask to determine if you should charge the business rate?

We currently charge residential rates for 'residential' and for those who work from home.
We are going to reviewing all aspects of our service rate schedule in the next couple of months.
One of items under consideration is to always charge business rates if a company cheque is used for payment.

 

[calldrdave]

We currently charge residential rates for 'residential' and for those who work from home.
We are going to reviewing all aspects of our service rate schedule in the next couple of months.
One of items under consideration is to always charge business rates if a company cheque is used for payment.

So if they are an attorney or therapist that sees clients in the home? Is that still residential. I find it a very slippery slope. A company check or invoicing could be a distinction since the risk is different.

 

[allanc]

So if they are an attorney or therapist that sees clients in the home? Is that still residential. I find it a very slippery slope. A company check or invoicing could be a distinction since the risk is different.

Yes currently, and I like I said, we will be reviewing our rates very soon.
Another indication could be whether they have signage.
I think everyone has to develop their own list based upon what they are comfortable with and possibly compare to the competition.

 

[Markverhyden]

I do work for a friend of mine on occasion. He has separate consumer and business pricing. If it's a new customer I just ask if it's a business. And he has had a couple customers who have retired so they get residential prices now.

 

[Metanis]

Put simply, in a business environment your risk is higher thus your compensation should be higher. In addition the potential complexity of systems and their interaction is also higher. You screw up in a business environment and you could be looking at a lawsuit for their downtime and loss of revenue. Screw up Aunt Matilda's picture folder and your reputation may take a hit but Aunt Matilda isn't twiddling her thumbs losing billable time.

 

[lan101]

I would have just gone with what you originally quoted and if things were totally different getting onsite, tell the client accordingly. You may have lost a potentially good client. You can never tell over a phone conversation or email if they will be good clients or not. I've had some where I thought they would be great clients based on conversation and they turned out to not be. I've had others where it sounded like they would just be a pain but ended up being pretty good ones. You just never know until you work for them a few times usually.